On Jun 17, 2013, shares of
UnitedHealth Group Inc.
) hit a 52-week high of $65.24. The momentum was driven by recent
hike in dividend as well as new share repurchase
Shares of the company gained 20.6% year to date as of the
close of trading on Monday.
UnitedHealth recently announced that its Board of Directors
has authorized a substantial hike of 32% in its quarterly
dividend to 28 cents per share. The company's board also approved
the repurchase of 110 million shares, which is about 10% of
UnitedHealth's outstanding shares. These actions reflect the
company's strong balance sheet position with a moderate leverage
and ability to generate significant cash flow.
We are also optimistic regarding the company's long-term
growth prospects. It has strengthened its key capabilities to
respond to the emerging growth opportunities. These initiatives
have been taken to expand its Medicaid and Medicare business,
grow the health service business and expand the international
UnitedHealth has also been aggressively expanding its overseas
business, which will provide the company geographical
diversification benefits. With increased regulations from the
Health Care Law at home the company is looking for business from
UnitedHealth has been successfully growing its membership.
With the implementation of TRICARE Contract, it added 2.9 million
military market beneficiaries.
Valuation for UnitedHealth looks reasonable. The shares are
trading at a discount to the peer group average both on a forward
price-to-earnings basis and on a price-to-book basis with return
on equity lower than the peer group average. The year-to-date
return from the stock came in at 18.7%, above the S&P's
return of 14.9%.
Other Stocks to Consider
Apart from UnitedHealth, other stocks in the industry that are
currently performing well include
) with Zacks Rank #1 (Strong Buy),
Health Net Inc.
) both with Zacks Rank #2 (Buy).
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